The wait always seems longer when it’s almost over—and the wait was on its way to excruciating as this paper hit its press deadline for the week. California spent more than 80 days without a state budget, and the mood in Santa Barbara County seemed to shift as the wait got longer.
When Gov. Arnold Schwarzenegger unveiled his first budget plan back in January, it received a mixed review. A lot of county agencies rely on state funds, and there were a lot of cuts in that first budget proposal. Still, there was hope among the waiting local agencies and school districts, because the first budget is just a rough draft. It gets changed during the May revision session.
But May came around, and the revision came back, and the cuts were, for the most part, still there. The general mood in the county shifted to resignation as local leaders prepared for a slim year. School boards started looking for places to cut, and county agencies knew that they’d have to make do with less money.
And then … that was it. For a long time, there was no news except that there was no news. To be more precise, there was no budget. As the wait grew longer, speculation turned to desperation. Questions of “What will the budget look like?” became “How are we going to make payroll?” MediCal wasn’t getting paid, schools were relying on loans, and agencies across the county were tapping into reserve funds to pay their bills during the silent spell.
And that brings us to the present.
Right before press on Sept. 23, news trickled in that Schwarzenegger had signed the state Legislature-approved budget. He had been working on it for more than 24 hours, trimming off $510 million by using his executive power to line-item veto whatever he felt necessary. The exact cuts were still making their way through the Department of Finance as these word were being typed, but it’s safe to say that by now everyone should have an answer.
The problem is, it’s not likely to be a good one.
“One thing that has historically been true is that the state, when it has financial problems, tries to share [its] pain with local government,” said Bill Watkins, executive director of the University of California, Santa Barbara Economic Outlook Forecast.
Distributing the pain, however, shouldn’t be a problem. Whatever cuts were made, the state isn’t doing so well financially—and, as a consequence, neither is the county.
“Virtually every county and every city in California is going to have a rough year,” Watkins said.
The budget passed by the Govenor includes $145 billion in expenditures from the General Fund, and no tax increases.
There are still a few loose ends to tie up, such as a proposed loan from the State Lottery to the tune of $10 billion over the next two years. Voters will have to approve the loan, most likely with a special election to be held in June.
Revenue will also be padded in other ways, mainly by establishing a 20 percent penalty for corporate taxpayers who understate their taxes (a move expected to generate $1.4 billion) and accelerating quarterly payments for taxpayers who make payments of 25 percent of their liability (to the tune of another $1.3 billion).
A disagreement over a tax increase, which Democrats in the Senate and Assembly wanted but Republicans didn’t, is one of the factors that held up the budget for so long, according to Jean Ross, executive director of the non-partisan California Budget Project, an organization that’s been tracking California’s state budgets for 14 years.
This year, Ross said, was an especially long and grueling experience. The end result, in her opinion, is nothing to be proud of.
“It doesn’t only kick a can down the road,” she said. “It kicks a six-pack.”
Ross said that there’s a tremendous amount of borrowing built into the budget, in addition to deep cuts to schools, health services, and “basically everything that the state does,” she said.
Across the state, people were waiting to see just what those cuts are going to be, and this county is no different. On Sept. 22, County Spokesman William Boyer said that the county and the board of supervisors were waiting impatiently for the budget to pass, so that the damages could be assessed. He said that once it passed, the county would rely on an outside company to make a complete analysis and breakdown of how cuts would affect each department in the county.
That process will take a few days, but there will be some information available right away.
“We’ll get our first quickie analysis as soon as possible once we get a copy and get some details,” he said.
The wait is over, but it does bring up another question: How did this happen in the first place? Well, with less money to spend, there are bound to be more arguments over how to spend it. After all, when the money is flowing freely, there’s enough for everybody to have a share.
But money is not flowing freely right now. According to Watkins, California is worse off than other states in this poor economy.
“We think that the state is in the middle of a recession right now, and will be deep into next year,” he said.
The housing market bust hit California especially hard, Watkins explained, and the same goes for the Central Coast.
“Santa Barbara County has probably been hit worse,” he noted.
While the cities of San Luis Obispo and Santa Barbara will experience slow growth in the next couple of years, it will be Santa Maria and Lompoc that are hit the hardest, Watkins said. Especially Santa Maria.
“The North County has been hit extraordinarily hard and has been in what we consider a recession for a couple of years now,” Watkins said.
Fast growth in Santa Maria has led to more suffering in the wake of the housing market downturn, Watkins explained. That’s the main issue. Another problem is, as San Luis Obispo and Santa Barbara slow down, Santa Maria, sandwiched in the middle, is going to lose money as well. This bedroom community is not going to be as busy.
While that’s the reality in Santa Barbara County, arguments over how to spend a limited amount of resources were just one of many reasons that the budget took so dang long, according to Ross.
Over the last 20 years, more voters have continuously walled off money, she said. Propositions that guarantee a certain amount of money for a program or sector can be a good thing when passed. Proposition 98, which guarantees money for schools, is one example—and one that educators are glad they have—but with a lot of propositions like this one on the books, money gets stuck and can’t be moved around as freely, Ross explained. That leaves fewer options for legislators looking to close a budget.
Then there’s Proposition 13. Passed in 1978, that bit of legislation required that the state budget—and any tax increase—needs a two-thirds majority vote to make it through the Legislature. California is the only state that has this law, Ross said, and its effect has been to gum up the system.
“The two-thirds vote doesn’t work for California,” Ross explained. “We’re too big and too diverse to be pinned in by rules that no other state follows.”
If the budget were able to pass with a simple majority, it would have gone through months ago, Ross said. Senate and Assembly Democrats had a simple majority long ago, but with a two-thirds majority needed, it was easier for a few holdouts to keep the debate open as long as they wanted to, she said.
“I really think a lot of the problems stem back to Prop. 13,” Ross said.
According to Ross—and Watkins—though it was a monumental struggle to get this budget passed, the state’s problems still aren’t over. Watkins said that he’s concerned the state is going into next year with a low stream of revenue.
“The problem with the budget right now is it’s not a permanent fix,” he said.
Locally, Santa Barbara County will still receive funds from the state, but for the most part the county is told how to spend that money, Watkins said. The county’s two main sources of discretionary funds—retail sales tax and property tax—are both down right now. One of the only bright economic lights in the North County is increased investment in oil fields in Orcutt and other locations, he said.
“We’re forecasting that the recession starts to turn in 2010 and the economy will become more positive, but it’s uncertain,” Watkins said.
There’s a lot that’s uncertain right now, but at least there’s a silver lining to this situation. And at least the wait for the budget is over.
Contact Sports Editor Sarah E. Thien at sthien@santamariasun.com.
This article appears in Sep 25 – Oct 2, 2008.